Reporting the Results of a Due Diligence Investigation

By Azad Khalighi – GlobeSt.com

Must the results of a Phase II Environmental Site Assessment be reported to regulatory agencies?

Frequently in the area of real estate due diligence, persons who engage consultants for a Phase II Environmental Site Assessment (Phase II ESA) face the question of whether or not they need to report data to regulatory agencies, and if so, who is ultimately responsible to do so.  The answer to this question varies on a case by case basis, depending on three primary aspects: the regulatory jurisdiction of the project; the scope and results of the investigation; and the purpose of the investigation.

Generally, if environmental impacts detected during a Phase II ESA exceed regulatory risk-based standards, action is required.  Who these findings should be reported to, and what kind of cleanup action is required at the property, is determined by the relevant agency that provides oversight for that site.

There are many different regulatory agencies which often have overlapping jurisdiction and each Phase II investigation is different in scope and purpose.  To be certain whether environmental concerns found during the Phase II ESA must be reported, property owners should discuss these aspects with their environmental consultant.  Sometimes, such information is best relayed from the agency regulators themselves, while in particularly complex cases an attorney in the field of environmental law can provide the best advice.

Regulatory Jurisdiction

A property owner may be required to report analytical data from a Phase II ESA if oversight is required in that jurisdiction.  In some instances, a jobsite is under regulatory oversight, and the scope of a subsurface investigation is in accordance with that agency.  Under these circumstances, the agency’s caseworker will most likely require the data to be reported.  Reporting the data to the regulator with pre-existing oversight is generally the duty of the responsible party, and consultants can submit the data on their behalf.

Importantly, risk-based standards are regulated on both a State and a Federal level.  The Federal Environmental Protection Agency (EPA) has jurisdiction across the nation, and publishes standards and foundational requirements per region for local regulatory agencies and departments to use as a template.  In addition to Federal regulators, States have multiple agencies with overlapping jurisdictions such as water quality boards, environmental protection boards, toxic substances control and more, each enforcing various regulatory action levels.  Within these state agency jurisdictions are county and city departments, which also overlap in jurisdiction, such as fire departments, public health departments, water agencies and more.

Each regulatory agency enforces different action/screening levels, which vary across the country.  In Montana, for example, levels are regulated by standards known as Risk-Based Screening Levels (RBSL), New Mexico follows the SSL (soil screening levels) program, Hawaii uses Environmental Action Levels, while standards are set by the Risk Evaluation/Corrective Action Program (RECAP) in Louisiana and the Significant Environmental Hazard Condition Notification Thresholds (SEHCNT) in Connecticut.

Additionally, the majority of city and county environmental departments will require a boring permit for drilling projects encountering groundwater, and a minority of them will require a permit for drilling, even if groundwater is not encountered.  Often times these permits have a closure process that requires all data to be reported.  Property owners should refer to their environmental consultants about whether or not their Phase II ESA project falls within one of these jurisdictions, and if so, prepare to release all analytical data to that department.  A city or county environmental department may report significant data from their permit package to a regional or state agency for regulatory oversight.

Scope and Results

A Phase II ESA scope of work generally includes, but is not limited to, drilling for the analysis of soil, soil gas, and/or groundwater.

Many State EPAs have published various regulatory standards for reporting and clean-up of these elements, such as the Generic Numeric Cleanup Standards for Groundwater and Soil in Maryland, the Soil Cleanup Target Levels in Florida, the Statewide Standards for Soil and Groundwater in Iowa and the Soil Evaluation Values (SEVs) in Colorado.

The Federal EPA has also developed Maximum Contaminant Levels (MCLs) as a health-based protective drinking water standard.  Generally, investigations which include the scope of groundwater sampling use MCLs as a guideline for the risk assessment, however often times other regulatory agencies enforce stricter groundwater and drinking water standards as well.  When a Phase II ESA concludes that groundwater concentrations exceed regulatory standards, the property owner may be required to report that data, if that jurisdiction’s agency requires it, if there are possible sensitive receptors which could potentially be affected, and if any required permitting process requires the data for closure.

The Federal EPA has published Regional Screening Levels (RSLs), and similarly, the California EPA has published Human Health Screening Levels (CHHSLs) for soil and soil gas. Screening levels are generally applied for the science of toxicology and risk assessment, and are not typically used as reporting limits, however some circumstances may still require that data be reported with respect to screening levels.

The advisory and terms of such published screening levels should be reviewed on a case by case basis to confirm any reporting obligations.  Additionally, it is important to consider many state and local agencies have established jurisdictional clean-up numbers which can overrule the requirements for reporting data exceeding these screening levels.

Since each project is different, responsible parties must not rely on generalized information, and should always discuss the conclusions of a Phase II ESA report with their environmental consultant.

Purpose of the Investigation:

Health and safety codes in most jurisdictions across the country indicate that responsible parties and consultants have the absolute duty to immediately report any contamination to soil, soil gas, or groundwater which has been discovered as a risk to public health and safety, or the environment.  Responsible parties should refer to their consultants about whether or not there have been such discoveries that pose a risk to the environment or public health at their site.

A Phase II ESA report may also recommend further investigation, or conclude that remediation is required, and it can be in the property owner’s financial interest to voluntarily report the findings, and remediate the site under regulatory oversight.

Ultimately, it is important for all responsible parties and consultants of a Phase II ESA to understand that each project is different, and similar scopes may still result in different reporting obligations depending on jurisdiction, results, and purpose.  To be certain, the responsible party of a Phase II ESA should never blindly rely on generalized information, but rather discuss their reporting obligations with their environmental engineering consultant, attorney, or local regulatory agency.


 


California Requirements Study

According to the California Health and Safety Code, any release of a reportable quantity of hazardous substance shall be reported to the department in writing within 30 days of discovery (See California Health and Safety Code, Section 25359.4):

       – A “reportable quantity” means either (1) the quantity of substances as listed in Part 302 (commencing with Section 302.1) of Title 40 of the Code of Federal Regulations, or (2) any quantity of hazardous substance that may pose a significant threat to public health and safety, or to the environment [See 25359.4(c)].

– According to the Department of Toxic Substance Controls, Fact Sheet Update for Reporting Nonemergency Hazardous Substances Releases, the term “discovery” as used in 25359.4 means when a person finds, learns, or otherwise acquires knowledge that a hazardous substance has been released.

– A release must be reported unless (1) it is permitted, (2) it is authorized, (3) it requires reporting to the Emergency Management Agency, (4) it has already been reported to the Emergency Management Agency, and (5) the release occurred prior to January 1st, 1994 [See 25359.4(b)].

According to the California Fire Code, the Fire Chief shall be notified immediately when a  release or an unauthorized discharge escapes containment, is contained but presents a threat to health or property, or becomes reportable under state, federal or local regulations (See California Fire Code, Section 8001.5.2.2).

Any person who causes or permits any hazardous substance or sewage to be discharged in or on any waters of the state, shall, as soon as that person has knowledge of the discharge, immediately notify the California Emergency Management Agency of the discharge in accordance with the spill (See California Water Code, Section 13271).

Comments are closed.